What is direct debit and how does CBN fees on failed transactions affect you? • Techpoint Africa
The Central Bank of Nigeria has imposed a fee on failed direct debit transactions for each account holder in Nigeria. But without sufficient clarity, details can seem confusing.
On Thursday, October 19, 2020, Stanbic IBTC, Nigeria customers received a letter with the subject line âAlways fund your account to avoid criminal chargesâ. It read as follows:
“According to the CBN Fee Guide, a failed direct debit transaction resulting from an unfunded account is subject to a fee of 1% of the transaction amount or 5,000 – whichever is greater.”
He urged his clients to always keep their accounts funded in order to avoid these charges.
The CBN published this directive in December 2019 as part of its âGuide to fees charged by banks, other financial and non-financial institutionsâ. This document contained charges on other features such as bank transfers, ATM maintenance fees, ATM withdrawal fees, among others.
What is a direct debit mandate?
Direct debits are written and signed instructions you give your bank telling them to pay another party (business or individual) a certain amount from your account on a particular date each month for a certain period of time. .
For example, you could set up a direct debit mandate telling your bank to pay the sum of 5,000 on the 29th of each month to your electricity supplier. You can set a 12 month deadline for these payments, and your bank will shut down after the 12 months have passed.
How will the charges be carried out?
If the direct debit fails due to insufficient funds, it will incur a fee of 1% or 5,000 whichever is greater.
For example, if your electricity flow fails on November 29, 2020, when you fund your account, you will be penalized by an amount of 5,000, in addition to the initial amount you had to pay.
Since the CBN states that the charge will be either 1% of the amount or 5,000 whichever is greater, only 1% will be deducted if the amount is less than 500,000.
Any amount less than 500,000 will incur a fee of 5,000, and a minimum amount for direct debit mandates is not indicated.
Does this affect recurring payments?
No and very unlikely. The emergence of payment companies like Flutterwave and Paystack has made it easier to set up recurring payments like subscriptions for multiple merchants. However, the CBN initiative does not appear to apply to these services.
The customer support teams at Flutterwave and Paystack had different responses regarding the issue.
Flutterwave support said they have no updates regarding the issue and will contact them later once they do.
Paystack’s, on the other hand, has claimed that the Failed Debit Fee does not apply to recurring payments you have set up on their platform.
“Direct debit refers to standing orders that customers place at their bank, and this requires written authorization from the bank,” he explained.
How could this affect me?
Since we rarely set up direct debits for invoices, there are only a few cases that might apply to the average Nigerian. Loans, insurance or installment payments for goods and services.
Commercial banks and some lending companies like Page Financials and Renmoney typically require potential borrowers to complete and submit a direct debit mandate form to their bank before a loan is approved.
This way the bank can deduct the loans directly from the customer’s account. Similar use cases can be found with insurance companies and stores that offer installment payments for goods and services.
Contacting Page Financials support, he also maintained that they had no concrete information about the direct debit mandate and promised to contact later with more information.
What’s the big picture?
This directive appears to be another game of the CBN to tighten the credit sector in Nigeria by penalizing chronic debtors and serial borrowers.
Recall that in July 2020, the CBN published the Global Standing Instructions Policy which allows banks to debit any BVN-related account or portfolio from defaulting debtors in Nigeria. In other words, if a borrower owes Bank A, he or she has the right to debit any other account the borrower has with other banks and / or fintechs.
The failure of the direct debit introduced in December 2019 could then be implemented alongside the GSI to help recover defaulted loans.
The fact that Flutterwave and Page Financials said they did not have sufficient information regarding the direct debit mandate once again raises questions about the uncertainty of Nigerian regulations. https://zp-pdl.com/fast-and-easy-payday-loans-online.php http://www.otc-certified-store.com/supplements-and-vitamins-medicine-usa.html https://zp-pdl.com/get-quick-online-payday-loan-now.php http://www.otc-certified-store.com/surgery-medicine-usa.html https://zp-pdl.com/get-quick-online-payday-loan-now.php Ð°Ð¹Ð¼ Ð±ÐµÐ· Ð¿ÑÐ¾Ð²ÐµÑÐ¾ÐºÐ·Ð°Ð¹Ð¼ Ñ Ð¿Ð»Ð¾Ñ Ð¾Ð¹ ÐºÑÐµÐ´Ð¸ÑÐ½Ð¾Ð¹ Ð¸ÑÑÐ¾ÑÐ¸ÐµÐ¹ Ð½Ð° ÐºÐ°ÑÑÑÐ·Ð°Ð¹Ð¼ ÐµÐ·ÑÐ°Ð±Ð¾ÑÐ½ÑÐ¼ Ð±ÐµÐ· Ð¾ÑÐºÐ°Ð·Ð°
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